I was having a lunch with a friend today. And he told me, next month, i.e. November, the largest Chinese online book retailer, Dangdang, will be going public in Nasdaq.

As one of the first major Chinese e-commerce sites going public, it must create lots of fuss. I heard from an investment bank source that Dangdang will go for a very aggressive valuation, about 1 billion. With about only US$5 million in profit last year, it suggests 200 times earning.

However, growth of the company’s core business (selling books) is slowing down (60% last year) as it is over 10 years old. Its new business line, which sells everything from electronics to linens, slipper, home decor, milk powder, etc, grows fast, over 230% last year. But that is only a small portion of the business. And it is doubtful Dangdang has any advantages in this area, as there are many competitors selling those items online. Dangdang is only famous for book in China.

When people think of books in China, they can think of Dangdang and Joyo (Amazon’s China subsidiary). But for the other items, not really. For electronics, 360buy. For milk powder and other baby products, may be Red Baby. All other items, most likely Taobao, the ultimate online shop, which almost has everything you can imagine.

What in the IPO pipeline is 360buy, the largest online electronics shop, which is growing much faster than Dangdang. Another one is Vancl, the largest online garments shop. Besides growing fast, Vancl also has better profit margin, as it develops its own brand, rather than solely reselling other manufacturers products.

An industry insider told me online book stores has gross profit margin of about 5-10%. Electronics, 3-5%. Garments, 20-50%.

I personally like Vancl the best, for its fat margin. But, many others like 360buy, as the the management is real ambition and aggressive.  Everyone believes 360buy is “the Amazon of China”, rather than Dangdang. But, Dangdang will take this credit when they go for IPO next month.

Author of Red Wired: China's Internet Revolution, the first book to completely survey the nature of China's internet. (http://redwiredrevolution.com/) She previously was the lead China technology reporter...

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